Understanding Car Leasing: A Comprehensive Guide to How It Works

Car Leasing

What is car leasing and how does it work?

The information on this website is general in nature and does not take into account your objectives, financial situation, or needs. Consider seeking personal advice from a licensed adviser before acting on any information.

Leasing is an often misunderstood car financing option so, in response to subscriber feedback, we've included this article to help give you a better understanding of what it is and how it works.

What's leasing all about?

Leasing is really just another form of borrowing to finance a car.

But unlike loan finance - where you take ownership of the car and offer it or something else as security to the lender - lease finance sees a leasing company take ownership and give you the use of the car under contract for a specified period.

Lease contracts

Upon signing your lease contract you agree to make regular monthly lease payments, keep appropriate insurance, pay any vehicle taxes or fees, and take good care of the vehicle.

Further, you agree that you'll keep the car for a specified period - typically two to five years - and you're expected to stick it out to the end of the lease contract.

At the end of the lease period, there is often an option to purchase your vehicle at a specified price.

Or you may be able to use the car as a trade-in on a new car.

Truck Loan Repayment Calculator

Explore potential truck finance scenarios with our Truck Loan Calculator. Test different loan amounts, interest rates and repayment terms to estimate borrowing costs and see how different financing assumptions may affect repayments for Australian businesses and drivers.

Truck Loan Repayment Calculator

Otherwise, the leasing company will expect the vehicle to be returned with no more than normal wear and tear.

You may have to pay them for any damage or extra mileage over and above a contract-specified limit.

Lease or buy?

Leasing may involve lower monthly payments than a car loan but this is often because you are only paying off a portion of the vehicle’s value, leaving a 'residual' amount at end of the lease period.

And at lease end, you will not own the car.

Leasing is often promoted as a cheaper way to finance a car because of the tax advantages it can bring for the self-employed or those who take out a novated lease through their employer.

This is not necessarily the case and really depends on how much mileage will be clocked up overall, what proportion is for work purposes, and what tax rate you are on.

Published: Sunday, 1st Aug 2021
Author: Paige Estritori

Rate this article

0 Comments

No comments yet. Be the first to share your thoughts.

Truck Loan Articles

How to find the best insurance for your trucking business in Australia

As a trucking business owner in Australia, finding the right insurance is crucial to the protection of your business. To achieve this, it is important to first understand your specific business needs. Here are some factors to consider: - read more

Why a Pre-Approval Can Give You an Advantage When Buying a Truck

When purchasing a truck, whether for personal use or business, navigating the financial landscape can be daunting. This is where pre-approval comes into play. But what exactly does pre-approval mean in the context of buying a truck? - read more

Essential Checklist for Commercial Vehicle Loan Approval

In the journey to secure a commercial vehicle loan, preparation is key. Just as a vehicle needs to be in perfect condition to hit the road, your loan application requires meticulous attention to detail to ensure a green light from lenders. This article embarks on the essential journey of understanding the critical checkpoints before applying for a commercial vehicle loan. We navigate through the path of prerequisites that pave the way for a seamless approval process. - read more

Tax, GST and depreciation considerations for business truck finance in Australia

Financing a business truck can affect cash flow, tax deductions, GST credits and depreciation claims. This guide explains key Australian concepts to discuss with your accountant before choosing a truck finance structure. - read more

How to Choose the Right Lender for Your Commercial Truck Loan

For many Australian businesses, purchasing a commercial vehicle is a significant investment that often requires financial assistance. Understanding the intricacies of truck financing is crucial, as the right loan can affect your company's bottom line and operational efficiency. With a plethora of lenders offering myriad loan products, choosing the most advantageous deal can be daunting. - read more

Finance News